27 January 2022

CVS Group plc

("CVS" or the "Company" and, together with its subsidiaries, the "Group")

Trading Update

CVS, one of the UK's leading providers of integrated veterinary services, gives the following update on trading covering the six months ended 31 December 2021 ("H1 2022").  The Company expects to announce its H1 2022 interim results on 24 March 2022.

Summary

·    Revenue up 11.4% vs H1 2021 with underlying¹ revenue growth up 13.2%

·    Adjusted EBITDA² up 15.5% vs H1 2021

·    Adjusted EBITDA² margin up 0.6ppts vs H1 2021

·    £10.6m capex, with good returns from recent investments in practice relocations and refurbishments

·    c.9% more vets employed in 2021 vs 2020, with the vet vacancy rate stable as we continue to focus on recruiting more colleagues to service increased demand 

·    Trading comfortably in line with full year expectations

H1 2022 Performance

We continue to see good momentum across the Group, with total Group revenue up 11.4% to £273.7m (H1 2021: £245.6m).  Underlying¹ revenue growth up 13.2%, excluding the prior year impact of Healthy Pet Club ("HPC") revenue which was deferred from FY20 to H1 2021 and the one-off revenue in H1 2021 from COVID-19 travel testing.  The Group continues to benefit from the increase in demand for its integrated veterinary services.

Like-for-like ("LFL")³ revenue increased 9.6% in H1 2022 with underlying¹ LFL revenue up 11.3%.  Trading in H1 2022 was impacted by colleagues required to self-isolate and the catch up of holiday postponed from H2 2021, a trend we do not anticipate continuing into the second half.

Our HPC preventative medicine scheme⁴ has seen a further increase in membership, up 7.6% to 461,000 as at 31 December 2021, from 430,000 as at 31 December 2020 (30 June 2021: 450,000). 

Group Adjusted EBITDA² margin remains strong, up 0.6ppts to 19.0% (H1 2021: 18.4%).  As a result of the revenue growth and improved margin, CVS expects to report H1 2022 Adjusted EBITDA² of approximately £52.0m (H1 2021: £45.1m).

We continue to invest in our practices, with £10.6m of Capex in H1 2022 (H1 2021: £6.2m).  We have completed 19 practice relocations and refurbishments since the financial year-end and are pleased with the payback of these investments to date, with an average increase of c.20% in revenue from these practices.

Our People

We continue to strive to be the veterinary company people most want to work for and are pleased that, reflecting the growth needs of the business, we employed c.9% more vets on average over the 12 months to 31 December 2021 vs the prior year, including a record number of new graduates.  Nevertheless, we continue to look to recruit further clinical colleagues to meet demand and therefore the vet vacancy rate remains stable at c.10%, reflecting the inclusion of newly created roles in the analysis in each of the last two years.

Net Debt

As at 31 December 2021, CVS had net bank borrowings⁵ of £63.2m and leverage on a bank test basis⁶ of 0.76x (30 June 2021: £51.3m and 0.68x respectively).  Interest cover⁷ measured at the end of the first half was 38.2x (30 June 2021: 25.0x).  These metrics reflect the Group's strong operating cash generation and are after paying annual bonus payments to colleagues and an annual dividend payment.  The significant headroom within existing facilities provides a resilient platform for further growth through ongoing investment in people and practices, supplemented by selective acquisitions.

Outlook

The demand for veterinary services remains strong, with increased ownership levels and the humanisation of pets driving a wider appreciation of quality veterinary care.  To maximise the opportunity from these positive consumer trends, and to drive long-term and sustainable growth, our focus remains on providing the best possible care to animals through our integrated platform, by investing in our people and practices to improve our quality of care and service levels, whilst also pursuing further acquisition opportunities.

The Board is pleased with H1 2022 performance and considers that current trading remains comfortably in line with management's full year expectations.  The Group is well placed to deliver on further growth opportunities over the longer term.

The Board would like to acknowledge and thank all members of the CVS team for their continued dedication and support.

 Notes

1        Underlying sales exclude the impact of prior year COVID-19 testing in our laboratories and Healthy Pet Club revenue deferred from FY20 to FY21. Management considers this unaudited measure to provide a useful insight to business performance as it adjusts expected reported revenue for these one-off factors.

2        Adjusted Earnings Before Interest, Tax, Amortisation and Depreciation ("adjusted EBITDA") is profit before income tax adjusted for interest (net finance expense), depreciation, amortisation, costs relating to business combinations and exceptional items. Adjusted EBITDA is used as a financial metric that removes the cost of debt, costs relating to depreciation and amortisation and one-off costs to achieve a normalised earnings figure that is not distorted by irregular items or structural investment.

3        Like-for-like sales are defined as revenue generated from like-for-like operations compared to the prior year, adjusted for the number of working days. For example, for a practice acquired in September 2020, revenue is included in the like-for-like calculations from September 2021.

4        Healthy Pet Club is our preventative care scheme for companion animals offering routine preventative care to clients for a monthly or annual membership fee.

5        Net bank borrowings is drawn bank debt less cash.

6        Leverage on a bank test basis is net bank borrowings; divided by adjusted EBITDA annualised for the effect of acquisitions, including costs relating to business combinations and excluding share option costs and exceptional items, prior to the adoption of IFRS 16.

7        Interest cover is calculated as adjusted EBITDA, annualised for the effect of acquisitions, including costs relating to business combinations and excluding share option costs and exceptional items, prior to the adoption of IFRS 16, divided by interest paid.

8        Percentage increases have been calculated throughout this document based on the unrounded values.

Notes to Editors

CVS Group is a fully integrated provider of veterinary services in the UK, with practices in the Netherlands and the Republic of Ireland.  CVS is focused on providing high quality clinical services to its customers and their animals, with outstanding and dedicated clinical teams and support colleagues at the core of its strategy.

The Group has c.500 veterinary practices across its three markets, including eight specialist referral hospitals and 35 dedicated out-of-hours sites.  Alongside the core Veterinary Practices division, CVS operates Laboratories (providing diagnostic services to CVS and third parties), Crematoria (providing pet cremation and clinical waste disposal for CVS and third party practices), Buying Groups and the Group's online retail business (Animed Direct).

The Group employs c.7,900 personnel, including c.2,000 veterinary surgeons and c.2,800 nurses.

Further information is available via the Company's website, at www.cvsukltd.co.uk